Companies that are in the position of pursuers or secondary players have less market share than the leaders. Some followers, fast-growing companies that are contenders for market share, pursue an aggressive strategy to increase their market share or strengthen their competitive position. Other pursuing companies belong to the category of narrow competitors and implement focused strategies on certain market segments. Also, in almost every industry, there are a number of companies that remain in second positions, in the role of catching up and unable to take a more advantageous position due to lack of resources or competitive advantages. Such companies are forced to copy the actions of leaders and follow the rules established by them as much as possible.
Competitive strategies of most secondary companies aimed at gaining sufficient market share and increasing production. For example, lowering the price of goods to lure customers of weak companies with high costs; mergers or acquisitions of competing companies to achieve the required scale of production; investment in economical technologies and equipment, introduction of technological innovations; relocation of production to countries with relatively low production costs; radical restructuring of the value chain to achieve radical cost reductions.
However, it would be a mistake to view secondary companies as obviously less profitable or unable to withstand the onslaught of large firms. Many small and medium-sized companies receive fairly high profits and enjoy a good reputation among consumers. If the economies of scale or learning are not very pronounced in a given industry, and the savings for large companies based on these effects are not too great, then secondary companies get room for strategic maneuver and can apply any of the following strategic approaches.
1. Offensive strategies to capture market share. An energetic company seeking to improve its market position must develop an original strategy to achieve a competitive advantage. Sometimes a minor company manages to improve its position in the market by copying the strategies of industry leaders. The main thing for secondary companies is to avoid a frontal attack on the leader with the help of an imitative strategy, no matter what resources and forces it may have [44 p.514]. Ambitious secondary companies seeking to break into the ranks of industry leaders should increase their market share by “rocking” it with the following options:
An unexpected technological breakthrough; Constant anticipation of competitors in bringing new or improved products to the market; building a reputation as a leader in the development of new products; A more energetic and innovative response than slow leaders to changing market conditions and customer needs; Conclusion of strategic alliances with key distributors, dealers and manufacturers of related products; The search for fundamentally different ways to radically reduce costs with the subsequent use of the policy of reducing prices to lure buyers away from competitors. A leadership-seeking company can drastically reduce costs if it restructures its value chain and eliminates inefficient links from it, simplifies the supply chain, increases the efficiency of internal business processes, implements electronic technologies, conducts a successful merger or acquisition of a competitor to increase its size to a level that provides economies of scale; Development of an effective product differentiation strategy based on first-class quality, technological leadership, high level of customer service, rapid modernization of goods, sale of goods via the Internet.
2. Growth strategy through the absorption of competitors. The strategy of growth through the acquisition of a competing company or a merger with it is very often used by ambitious secondary companies. The result is a new, more powerful company with greater competitive capabilities that can dramatically increase its market share. For the success of this strategy, the company’s management must prepare to integrate the acquired company into its structure, eliminating duplication and overlaps, increasing efficiency and reducing costs, strengthening competitive opportunities by combining the resource base. Many banks in recent years owe their growth to acquisitions of small regional and local banks. So did many publishing houses; clinics and treatment centers in the United States.
3. Strategy of capturing a free niche. This is one of the options for a focused strategy, consisting in concentrating efforts on a separate segment of consumers or product models, which for some reason are ignored by industry leaders. Ideally, the market niche should be large enough to provide a satisfactory level of profitability of operations and growth potential, correspond to the resource base and competitive capabilities of the company and not be of interest to large companies. Examples include local airlines, where the number of passengers is too small and does not ensure the filling of large airliners of large companies; production of environmentally friendly products (this is done by companies such as Health Valley, Hain and Tree of Life) and their sale through local health food stores; this sector of the market traditionally does not enjoy the attention of the leading companies of the food industry – Pillsbury, Kraft General Foods, Heinz, Nabisco, Campbell Soup.
4. Specialization strategy. A specialized company directs its efforts to the acquisition of unique knowledge and experience in the production of one particular product or product group, the operation of one technology, the service of one segment of consumers (often having specific needs). The company seeks to form a resource base and develop competitive capabilities in its specialization in order to gain a competitive advantage in one narrow area. Examples of small companies successfully applying this strategy are Formby’s (painting and polishing used wooden furniture), Blue Diamond (growing and selling almonds in California), Canada Dry (ginger beer, tonic and mineral water), American Tobacco (a leader in the production of chewing and snuff tobacco). Many companies in high-tech industries strive for leadership in a particular technology, providing themselves with a competitive advantage by staying ahead of rivals in the application of this technology and unique technical experience.
5. Superior quality strategy. This is a variant of a focused strategy through product differentiation, in which the emphasis is on unique quality or consumer properties. Marketing is carried out based on the segment of buyers sensitive to quality or any consumer properties. This strategy is characterized by high quality, constant updating of the product and / or the establishment of close ties with consumers in order to improve the product in accordance with their wishes. Examples include Bombay and Tanqueray (gin), Tiffany (diamonds and jewellery), Chicago Cutlery (kitchen knives of the highest quality), Baccarat (crystal), Cannondale (mountain bikes), Bally (shoes), Patagonia (sportswear for outdoor activities).
6. Distinctive image strategy. Some secondary companies build their strategy on the basis of an easily recognizable and different image of the company from rivals. Distinctive features can be: the reputation of the lowest prices, the reputation of goods and services of elite quality at affordable prices, the image of excellent customer service, the reputation of unique consumer properties, leadership in introducing new products to the market, a non-standard advertising campaign. This strategy is applied by the following companies:
Dr. Pepper (unique taste properties of products), Apple Computer (active promotion of Macintosh computers), Mary Kay Cosmetic (the original use of pink).
7. Voluntary retreat strategy. Companies that deliberately recede into the background refuse any aggressive actions or attempts to lure consumers away from competitors. They act in a way that does not exacerbate competition in the industry, and prefer focused strategies and differentiation strategies, avoiding direct competition with market leaders. They react and retaliate, but they do not step in or initiate competitive action. They prefer defense to offense and rarely enter into price competition. Their main goal is to maintain their market position, although sometimes they have to fight for this. Secondary companies, as a rule, try to imitate in their products the consumer properties and design of the goods of leaders in order to sell them to price-sensitive consumers much cheaper than products of well-known brands [15 pp.277–280].